Sanction to sell trust property obtained by fraud can be revoked, rules High Court
28 Apr 2020 08:01:51
Staff Reporter :
Over-ruling the prevalent view about finality of sale of trust property after execution of sale-deed, the full bench of High Court on Monday held that if consent of the Charity Commissioner was obtained by fraud, misrepresentation or suppression of material facts, then such consent could be revoked even after execution of a sale-deed. The full bench headed by Justice Bhushan Dharmadhikari and consisting of senior administrative judge Justice Ravi Deshpande and Justice Amit Borkar clearly held that execution of sale-deed or multiple sale-deeds would not prevent the Charity Commissioner from revoking the sanction granted under Section 36(1)(a) of Maharashtra Public Trusts (MPT) Act, if the fraud or misrepresentation was proved.
Addressing the apprehension about loss of sanctity to any property dealings done by any trust after obtaining proper consent of the Charity Commissioner, the High Court clarified that subsequent purchasers had right to raise all defences available under Section 50 of the Act to protect their possession. If the suit to be filed by trust for grant of declaration, to which the subsequent purchaser is a necessary party, is not filed within a stipulated period or is dismissed on merits, they succeed in protecting their possession and ownership over the trust property, the High Court noted.
The High Court held that under Section 36(2) of the Act, the Charity Commissioner had powers to revoke the consent obtained by fraud and trust or the Charity Commissioner could file suit under Section 50 for recovery of the trust property. Adding a word of caution, the High Court made it expressly clear that it had not examined the issue of remedies and defences available to the bona fide purchasers for valuable consideration without notice after the order of sanction was revoked under Section 36(2) of the MPT Act and would do so in appropriate proceedings.
The full bench over-ruled Mahadeo Deosthan ruling of 1989 which took the view that sanction granted under Section 36 of the MPT Act for alienation of the trust property could be revoked only as long as the property retained the character as that of a trust property and not thereafter. It was held that the power of revocation was required to be exercised before the sanction had been acted upon. If the property did not remain a trust property, the Joint Charity Commissioner would lose jurisdiction over that property and the High Court had held that the power of revocation of sanction could be exercised only if the trust was not divested of that property. The rationale of this judgement was followed in many cases.
The full bench ruling authored by Justice Amit Borkar had put to rest divergent view about finality of the sanction granted to trust to alienate property under Section 36 (1)(a) of MPT Act. Now, such sanction can be challenged and Charity Commissioner has been empowered to revoke it even after execution of sale-deed if it comes to fore that such sanction was obtained by fraud or misrepresentation or by concealing material facts. Senior Counsel Anand Jaiswal and Adv Radhika Bajaj appeared for the petitioner.
Adv Shriganesh Abhyankar (Deosthan), Adv Rahul M Bhangde (complainant trustees), GP Sumant Deopujari (Charity Commissioner) represented the respondents. The Case The issue arose in the case of Shri Rammandir Deosthan-Pavnar, a public trust that owned over 15 acres of land. The trust sought permission of the Joint Charity Commissioner (JCC) under Section 36(1)(a) of the MPT Act to sell the land. Avinash Jaiswal and his wife submitted the highest bid. On October 25, 2011, the JCC granted permission to the trust to sell the land in question to petitioners. No payment was done and sale-deed was not executed for almost three years.
In September 2014, two trustees sought revoking permission granted to alienate the aforesaid property. They accused the trust Secretary of concealing certain material facts. JCC issued notices. Meanwhile, the Secretary executed a sale-deed on January 12, 2015 in respect of trust property. The applicants sought to nullify the sale-deed executed during pendency of the application. The purchasers filed application seeking dismissal of the proceedings on the ground that as the sale-deed had been executed in their favour, the property did not remain trust property.
They relied on decision of Bombay HC division bench in the case of Shri Mahadeo Deosthan-Wadali vs JCC, 1989. The JCC rejected the application for dismissal of proceedings. The purchasers challenged this order before Nagpur bench of Bombay HC. They relied on the judgment of Shri Mahadeo Deosthan-Wadali claiming that revocation of sanction granted under Section 36(1) was not permissible after execution of sale-deed. Justice Atul Chandurkar did not agree with the view taken in Mahadeo Deosthan case and directed to place the matter before the Chief Justice to consider whether the present writ petition could be heard by the bench of two or more judges. He made it clear that jurisdiction of the Charity Commissioner to revoke sanction could not be divested if fraud or misrepresentation came to fore even after alienation of the property.